Observe Main Street Anger: Goldman Sachs' Derivative Scandal

Updated on June 3, 2014

Goldman Sachs boasts of Selling Derivatives to Orphans and Widows

Apparently some of the customers of Goldman Sachs were nothing more than "widows and orphans" in their twisted perverted and immoral minds. What a bunch of disgusting individuals are the Goldman Sachs traders who can communicate with each other on the most disgusting and vile level by which human beings can interact! I am so very disgusted that I would like to see the entire company destroyed. I hope that the American government will get the message and that they better not let Goldman off the hook.

Not only does it appear that Goldman Sachs violated the fiduciary responsibility that they had with these clients, but it appears that their arrogant and disgusting portrayal of said clients has reached a zenith of pathetic racketeering. I demand that the government investigate a pattern of abuse that can result in racketeering charges and a wave goodbye to Goldman Sachs forever!

Senator Levin at the hearing on 4/27/2010 said it like it is: Goldman Sachs created synthetic CDO's which a Goldman employee called "junk" and offloaded their risk in going long on the real estate market by offloading this "junk" (which Goldman was short on) onto unsuspecting clients who lost their shirts, including big banks.

Levin held up the executive summary of the synthetic CDO's which Levin said was assuring investors that Goldman's interest was aligned with the longs! But, they weren't aligned with the longs. According to Levin, they were short the junk!

At the hearing, Levin first hit the Goldman Sachs sales team, led by former employee Daniel Sparks, hard, and then the questions were tempered and the Goldman guys thought they were making points about their moral uprightness and fluff. But the Levin hit Mr Sparks with the junk issue and he appeared to close up tighter than a clam. Synthetic CDO's did not contain mortgages bonds made up of real mortgages, but rather contained insurance bets on mortgages bonds. It appears that Goldman's executive summary, as mentioned above, was not worded to represent their short positions.

David Viniar, a risk management guy tried to say that Goldman only made a net 500 million dollars for 2007 on their big shitty short, as they sold synthetic CDO's "junk" to long players, or the suckers. But of course, if you count the 12.9 billion dollars that that thief Tim Geithner got from AIG and transferred to Goldman, The 12.9 billion was for insurance Goldman bought against mortgage pools. GS made out like bandits in their short trading, playing like bookies who also took one side of the bet! Thanks to Senator Coburn for pointing out the sleight of hand effort to divert away from the massive AIG bailout that was ultimately a huge profit for Goldman Sachs from the housing meltdown, although delayed. Levin closed the questioning by asking if he thought it was a bad thing that Goldman had emails saying that the deals they offered were "shitty". Viniar said that it was too bad that the words were on the emails, meaning that it was too bad that these emails were ever discovered! What a putz.

Lloyd Blankfein is like a slippery slope, and Levin has a hammer and is trying to whac-a-mole. Lets hope that he delivers a few blows to the ethically blind CEO of Goldman Sachs. Levin said he could never trust Goldman to sell him anything!

The New York County prosecutor should get an earfull as to why Goldman Sachs is not prosecuted for racketeering under the Rico laws. Racketeeering should be pursued against all the investment banks, through thorough criminal investigation. Racketeering is a consistent business model that is illegal and that is used over and over. I would hope that people would give this number (NY County Prosecutor) a call: (212) 335-8900

Ford Motor company still uses Goldman for business. Email Ford at their website encouraging them to drop Goldman.

At the close of the hearing, Senator Levin had three points:

1. He pointed out that the great depression was caused by bankers selling bonds that they don't believe in. Well, Goldman cannot guarantee a CDO, but they sold the CDO when they certainly didn't believe in it. Levin's conclusion: Don't believe in Goldman Sachs if you don't want to be scammed.

2. He pointed out that Goldman had a big short, unique to all investment banks, a net short of 13 billion dollars while they were selling long the securities they were shorting. Levin proved that Goldman, by the documents, had a change in direction from long to the big short in 2007. He says this apparent conflict of interest must be stopped and must be regulated.

3. A whole bunch of investors, like pension funds could only invest in AAA securities. Blankfein, in his deposition prior to the committee appearance, said he never thought about it! Even the AA bonds that were repackaged to AAA securities and sold to pension funds, and crashed within months, didn't give Blankfein a twang of conscience! Goldman and other investment banks ran roughshod over mainstreet, over pension funds, cities, foreign investors, etc. by selling crap AAA bogus CDO's. Beyond the shorting that Goldman did, they all sold crap without even seeking to question the ratings and the quality of what they were selling! That should bring, in my view, racketeering charges against all the investment banks, including Goldman Sachs for selling bonds that they did not believe in.

What About the May 6th Incident?

While there is no direct link to Goldman for the May 6, 2010 program trader meltdown that sent Accenture stock to .01 cent for a time, there is evidence that trading houses that have ties to investment banks quit trading when the market started to go down, resulting in an absence of liquidity and a 700 point crash in 15 minutes. While the market was rightfully down over Greek debt worries, this add on massive drop that took P&G from north of $60 to $40 in a matter of minutes was somehow caused by program trading.

UPDATE: Warren Buffett is a very shady character because he defends Goldman Sachsand had unusual behavior on 911.

He is defending Goldman when he owns Goldman, He owns 31 million of the 237 million shares outstanding of Moody's, the rating agency that rated crap loans AAA and who helped Goldman and other investment banks peddle really bad CDO's made up of loans that were not anything near AAA quality.

Buffett also had a very strange tournament in 2001 on 911 at the Strategic Command Headquarters. Just happens that the CEO of a corporation who would have been killed on 911 was at the event, safely away from the tragedy that destroyed many of her colleagues. Here is what the author at the killtown911.com website said:

"Now if Warren Buffett hosting a "charity event" at the U.S. Strategic Commander headquarters on 9/11 in which one of the invited guests was a CEO who's offices were where the 2nd hijacked plane crashed into at the WTC and that the head of the 9/11 investigation used to be the director of her company doesn't raise an eyebrow or two, then maybe the following little tidbits will..."

It turns out that the CEO, Anne Tatlock, had a company director, Thomas Keen, who was chairman of the 911 investigation! How convenient! Truly, with even more interesting "coincidences" at the Killtown link, either Warren Buffet was the dumbest billionaire in the history of the world, or he had a few paw prints connected to 911. An investigation which will never be held would clear this up.

The potential smoking gun that could expose Warren Buffett is the Buffett owned Net Jet aircraft that followed flight 93 instead of military aircraft.

So, why would Buffett support Goldman? Perhaps brothers in deception, even if the deception is not related, flock together? Or maybe there is more than meets the eye.

Disclaimer: Both Goldman Sachs men and Warren Buffett have not been convicted of any crime in a US court of law. I personally believe from a religious perspective that they both are guilty of many acts, and that a higher judge will determine or perhaps already has ultimately decreed their final destinies.

Levin Grills Goldman

How Will This Indictment Bleed Over Into Other GS Issues?

Before listing some great insightful quotes found on the Yahoo message board, I want to show you the essence of pitfalls facing Goldman Sachs. Jeff Nielson, a Seeking Alpha contributor, provided a link to this great Canadian blog
which makes the case that Goldman may have fooled AIG into writing
insurance on CDO's doomed to failure. This is big because of the huge
financial windfall it would bring to AIG and the huge financial vacuum
that would eat at the value of Goldman Sachs' stock. As Bullion Bulls
Canada wrote:

In the case of AIG, it is alleged that Goldman Sachs'
“shorts” duped AIG into underwriting “credit default swaps” (a form of
insurance) against “assets” which Goldman Sachs knew were of such poor
quality that default was all but inevitable. Then, after
AIG had underwritten those contracts, Goldman Sachs placed huge “bets”
against those credit default swaps. Not only would those huge bets
produce massive, windfall profits for
Goldman Sachs, but merely the act of betting against those credit
default swaps increased the probability of default.

This method of investing could mirror the way Goldman
went after sovereign debt. Perhaps the Fed and the central banks have
had enough. Not that ponzi finance would end merely by getting rid of
Goldman. Truth is, there is a case for
nationalizing or abolishing the central banks. I am for
nationalizing because the government could monitor bubbles better than
Alan Greenspan and friends.

But the fact that this indictment
came out puts Goldman at risk of severe penalties for shorting sovereign
debt and for shorting AIG, owned by all of us. Perhaps the world
central bank syndicate has determined to stop this greed that threatens
sovereign debt in its tracks.

I am not defending the dark overlords, the central banks. They are still responsible for the bubbles and the ponzis that exist by their easy money policies and lack of regulation. Maybe we will never know publicly about their anger toward Goldman Sachs. And they likely are trying to save themselves in the world of public opinion by sacrificing Goldman. But,
we will have to see how events unfold around this strategy of what seems
to be, if proven, a dishonest method of using CDO's and credit default
swaps on the part of the investment bank.

If it could be proven that Goldman knew the CDO's would
likely fail, and then they got AIG to write insurance on them and then
bet against that insurance, we could be close to a charge of
"racketeering". If all this could be proven, one could make the case
that Goldman was operating an illegal business model, which is what
racketeering is. I bet attorneys would lick their chops on that one!

As it turns out, from news reports, apparently Goldman is saying that this behavior was just what Wall Street did in those days and that these were common practices. Are they building their own case against themselves with regard to racketeering? If it can be proven that Goldman and
other companies knew that the CDO's of ponzi housing loans and other
loans would fail and used that knowledge over and over to structure
insurance and bets, could not this be racketeering and insurance fraud? Is not a continual practice of insurance fraud a form of racketeering?

With regard to the firm's own clients and the original SEC indictment, If Goldman is found to have a
fiduciary responsibility to clients and then is proven to have deliberately scammed them, then we
could be looking at another Enron. As Yogi Berra says, it could be Deja
vu all over again. At any rate, the current charges relating to
fiduciary irresponsibility as expanded in the Canadian blog appear to
have a real chance of taking Goldman down.

There are other fish in the pond for the SEC to go after as well. Bookmark my site and check out this link. We are talking about all of Wall Street's biggest players.

Now That Goldman Is Being Investigated on Criminal Activity What is Next?

A fellow (Patriot is his handle) who contributes to Marketwatch commentary has a nice take on Rico Laws (which would kick in for multiple examples of insurance fraud against AIG if proven, or for multiple examples of securities fraud or even mail fraud.

Under RICO, a person who is a member of an enterprise that has committed
any two of 35 crimes—27 federal crimes and 8 state crimes—within a
10-year period can be charged with racketeering. Those found guilty of
racketeering can be fined up to $25,000 and sentenced to 20 years in
prison per racketeering count. In addition, the racketeer must forfeit
all ill-gotten gains and interest in any business gained through a
pattern of "racketeering activity." RICO also permits a private
individual harmed by the actions of such an enterprise to file a civil
suit; if successful, the individual can collect treble damages."

Goldman Sacked by Backlash. Where Were the Republicans?

Max Kaiser Blasts Goldman Sachs. Did Obama and the SEC Listen?

Goldman Sachs Recommended Study

Mainstreet Comments About Goldman Sachs. People Are Learning.

I think that people who frequent financial websites don't really see much of the anger of mainstreet. This Reuters article out of print by Yahoo has some comments at the bottom of the article that are worth reading. In the light of breaking news that Goldman Sachs has been accused of fraud by the Securities and Exchange Commission for shorting the CDO market they sold to retail investors, these comments are revealing. Before I talk about some possible impacts of this investigation on Goldman's method of operation, here are some comments from Yahoo readers:

Elaine says:

I fail to see how continued low interests help anyone but the banks. The rates they pay to customer's are 2% and lower, the loan rates quoted are 8% and credit cards are out of this world. The banks in our area are not loaning money but one is building an additional branch and one is remodeling.

Mike says:

Low rates equal banking profits. Rarely, are the low rates passed on to the consumer, beyond a certain point. The Central Bank is behind closed doors making policies which will be announced in some Jibberish language which means nothing. It is my understanding that presently the banks can borrow as much money as they want and deposit it at the Central Bank for a profit based on a higher rate. Ultimately, the taxpayer is paying the bank to borrow money it doesn't put in the economy. How much can I sign up for, in this unlimited profit scheme!

Johns says:

Of they are leery there might be a chance that their true action may come into the light of the public

The fed is operated in a manner to keep the rich rich and the poor poor once all the balance sheets are in order for all the big corporations and the banks the fed will dry the money supply up where the peasants will be grateful to take a 5 dollar an hour gig, and will be beating the doors down at the credit card companies once again to get those 20 percent credit cards to buy groceries with

The fed and all of its Goldman Sach cronies and all of these filty politicians that have supported them needs to be flushed out of the system as the system has been a disservice to the public since its inception in 1913 one should read the fed charter part of it duty is to defend the currency not make it a trade paper for the chinese communists to control the manufacturing here in this country the corporations with the aid of the corrupt fed structure is killing this country

KT said brilliantly:

The "ruling class" sets into motion a series of events that fit into 5, 10, 20, and even fifty year plans for a "new world order".

The Gramm-Leach-Bliley Act, also known as the Financial Services Modernization Act of 1999, (enacted November 12, 1999) is an act of the 106th United States Congress (1999-2001) which repealed part of the Glass-Steagall Act of 1933, opening up the market among banking companies, securities companies and insurance companies. The Glass-Steagall Act prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company.

The Gramm-Leach-Bliley Act allowed commercial banks, investment banks, securities firms, and insurance companies to consolidate. For example, Citicorp (a commercial bank holding company) merged with Travelers Group (an insurance company) in 1998 to form the conglomerate Citigroup, a corporation combining banking, securities and insurance services under a house of brands that included Citibank, Smith Barney, Primerica, and Travelers. This combination, announced in 1993 and finalized in 1994, would have violated the Glass-Steagall Act and the Bank Holding Company Act of 1956 by combining securities, insurance, and banking, if not for a temporary waiver process.

The law was passed to legalize these mergers on a permanent basis. Historically, the combined industry has been known as the "financial services industry".

Folks, it's all about transferring wealth, mainly from the middle class to the upper class.

Here's an example:

Obama's economic team consists of Robert Rubin's proteges including Timothy Geithner, Treasury Secretary, Lawrence Summers, Senior Economic Adviser and Peter Orszag, Office of Management and Budget Director. The Times of London has already dubbed them the "Robert Rubin Memorial All Stars."

In an article entitled "Ponzi Scheme at CITI," the New York Post reported: "A Citigroup scandal is engulfing Robert Rubin and his former disciple Chuck Prince for their roles in an alleged Ponzi-style scheme that's now choking world banking.

Director Rubin and ousted CEO Prince—and their lieutenants over the past five years—are named in a federal lawsuit for an alleged complex cover-up of toxic securities that spread across the globe, wiping out trillions of dollars in their destructive paths.

Investor-plaintiffs in the suit accuse Citi management of overseeing the repackaging of unmarketable collateralized debt obligations (CDOs) that no one wanted—and then reselling them to Citi and hiding the poisonous exposure off the books in shell entities.

The lawsuit said that when the bottom fell out of the shaky assets in the past year, Citi's stock collapsed, wiping out more than $122 billion of shareholder value.

However, Rubin and other top insiders were able to keep Citi shares afloat until they could cash out more than $150 million for themselves in "suspicious" stock sales" calculated to maximize the personal benefits from undisclosed inside information," the lawsuit said.

In an article, "The Great American Ponzi Scheme," Robert Butche writes, "Little did people know that banking and finance had contracted a nasty disease—one known in the grifter trade as a Ponzi Scheme—in which sub-prime mortgages were securitized and traded based on an unsustainable promise to pay high returns to investors from monies obtained from subsequent investors."

In the commentary to the NY Post article above, a Ph.D. in Physics explained that his fellow graduates all went to work for big banks, brokerages and Fannie May. They can take any number(s) as an input and produce any output as desired. Hence the banks hired at a much higher pay these people than they could earn in Universities or research institutes...Their bosses told them to inflate the value of anything to any number and these people did that."

Hence, the financial fiasco!

The Yahoo Posters Have Great Insight. Here Are a Few Solutions

Bgamall here. These Yahoo posters are a lot more eloquent than me. Certainly people
are concerned that the system is so rotten, so corrupt, that it cannot
possibly turn out well for mainstreet. The complete impoverishment of
mainstreet will, IMO, come back to bite Wall Street. At least I hope it
does. I hope even more that Wall Street can be reigned in and that mainstreet can avoid becoming impoverished.

Not hoping for the retail investor to get hurt, but I am
hoping that the people responsible for all this ponzi activity will
finally be shunned and disgraced so that they cannot walk down a street
without the Scarlet letter being attached to their foreheads.

These bankers villainy is just now being exposed. I know Jamie Dimon of JP Morgan
objects, but villains they are and the greatest disdain possible from
the American public should at least give them and their dirty politician
friends pause in this rush to usury and legal loan sharking.

We need some reform here. I heard about multiple derivatives being taken
out on one product. That is like having multiple mortgages taken out on
one house! The banks are likely hiding all of this junk. So we need a
few changes:

1. We need the Volcker rule. Insolvent banks of all sizes need to be forced to fail. If the current TBTF banks, JPM, C, BAC, WFC and GS are hiding bad debt off their balance sheets like Enron did, they need to be accountable and taken down.

Of course, Enron wasn't a bank, and Basel 2 in 1998 made off balance sheet banking, but not shell hidden companies, legal. If someone could prove that the TBTF banks had shell companies in existence that were taking the bad loans and CDO's and default swaps, then perhaps they could be taken down. Lehman, who did have those hidden companies, was taken down.

Disclaimer:No Racial Comments Help the Cause Against the Big Financial Banks

Disclaimer: I have seen some comments on Yahoo and even
some comments on the Seeking Alpha site that try to couch the argument against the
investment banks in a racial or ethnic context. This is so wrong on so
many levels:

1. It is just wrong because the
majority of all ethnic and racial groups are hard working, honest
people.

2. There are many ethnic groups involved in furthering
the interests of investment banking and who also may or may not be
engaged in dishonest practices.

3. The argument against Wall
Street excess has a certain moral righteousness that is weakened and
destroyed by any playing of a race card. It just must stop.

Look at These Goldman Sachs Alumni. What Sickening Praise of Swine

My Letter to Harry Reid

While it is unlikely that he will do much, it felt good to write the following email to Harry Reid:

Mr Reid, give your Goldman money back. And force the justice department to bring insurance fraud and racketeering charges against all companies engaged in synthetic CDO's. You have abandoned the common man. You have abandoned the people of Nevada.

Giving back the money isn't enough. The-Too-Big-To-Fail banks are the new worldwide mafia. Stop them and set up a real finance reform to let them fail.

You used to be a man of honor and you fought the mafia in Nevada. Well, the real mafia is the central bank cabal that allowed all this ponzi finance. I am publishing this email and hope you act.

Banks Must Obey the Law. I disagree with Max about a One World Currency, but He Knows Central Bankers are Colluding.

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Comments 12 comments

They need to put a few of the top Goldman people in jail. Fines won't be enough to deter their depredations. I'm going to come back to your excellent Hub and watch all the videos and pursue the links.

bgamall 6 years ago from Las Vegas, Nevada Author

Thanks for stopping by Ralph. Certainly criminal charges will be the power that unnerves Wall Street. We can only hope they come soon. I believe that may be the case in Europe first.

thevoice 6 years ago from carthage ill

great hub truth well read thanks

bgamall 6 years ago from Las Vegas, Nevada Author

YW, Voice. Hope that it helps people learn about these issues.

Hello, hello, 6 years ago from London, UK

I never seen cold blooded fraud on such grant scale as of late and nobody seems to bother to cut them down. In England too. Thank you for a more than well written hub.

Jacob Darkley 6 years ago from California, USA

Compelling and timely post. Thanks so much.

Jacob

billyaustindillon 6 years ago

It will be interesting how this plays out - my worry is that it is just political window dressing to pass reforms and given Goldman is so influential with Obama there may not much follow through other than the scapegoat. They will be serious if they go after more. With AIG I remember reading that AIG believed everyone else was wrong on CDS. I have a few Goldman hubs, be interested on your thoughts. Great Hub.

bgamall 6 years ago from Las Vegas, Nevada Author

Thanks for commenting guys. Billy, I have suggested that Goldman needs to be taken down. Whether that happens or not time will tell. It all depends on whether the central banks are angered by Goldman. After all, they are in charge.

thevoice 6 years ago from carthage ill

great great hub my friend thanks

bgamall 6 years ago from Las Vegas, Nevada Author

Glad you enjoyed it. We hope justice is done.

TheMoneyGuy 6 years ago from Pyote, TX

True some of the execs may face fallout, but the true criminals the majority stock holders who pay and incentivise the execs into their behavior will do as they always have. This will change nothing. Again, we go after the worker while they master sips champaigne and plots his next assault on humanity.

TMG

bgamall 6 years ago from Las Vegas, Nevada Author

Well said, Moneyguy. Bondholders and hedge funds have nothing to fear. But they should have government to fear.